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XL Capital Reports Record Fourth Quarter 2006 Net Income Of $471.1 Million, or $2.62 Per Ordinary Share.

Full Year 2006 Record Net Income of $1,722.4 million, or $9.60 per ordinary share

Fourth Quarter and Full Year 2006 Highlights

  • • "Net income excluding net realized gains and losses"(1) was a record $513.8 million, or $2.86 per ordinary share for the quarter, resulting in a record "net income excluding net realized gains and losses"(1) for the year of $1,763.3 million, or $9.83 per ordinary share
  • • Combined ratio from general operations was 87.5% for the quarter and 88.5% for the full year
  • • Total net investment income for the quarter increased to $522.5 million
  • •  Net income from investment and operating affiliates was $154.5 million for the quarter
  • •  Book value per ordinary share increased 19.9% for the year to $53.12
  • • Return on ordinary shareholders' equity, based on "net income excluding net realized gains and losses"(1), was 22.1% for the quarter (annualized) and 20.1% for the year

HAMILTON, Bermuda, Feb. 6 /PRNewswire-FirstCall/ -- XL Capital Ltd ("XL" or the "Company") (NYSE:XL ) today reported net income available to ordinary shareholders for the quarter ended December 31, 2006 of $471.1 million, or $2.62 per ordinary share, compared with a net loss of $821.9 million, or a net loss of $5.51 per ordinary share, for the quarter ended December 31, 2005. "Net income excluding net realized gains and losses"(1) for the fourth quarter of 2006 was $513.8 million, or $2.86 per ordinary share, compared with a "net loss excluding net realized gains and losses" of $868.2 million, or a net loss of $5.82 per ordinary share, for the prior year period. Included in both net income and "net income excluding net realized gains and losses" for the quarter ended December 31, 2005, was a net loss after tax of $808.9 million related to the Winterthur International independent actuarial decision (the "Winterthur Decision") and a net loss after tax of $390.7 million related to Hurricane Wilma and adverse development on the third quarter 2005 natural catastrophes.For the twelve months ended December 31, 2006, net income available to ordinary shareholders was $1,722.4 million, or $9.60 per ordinary share, compared with a net loss of $1,292.3 million, or a loss of $9.14 per ordinary share, for the twelve months of 2005. "Net income excluding net realized gains and losses" for the same period was $1,763.3 million, or $9.83 per ordinary share, as compared with a "net loss excluding net realized gains and losses" of $1,535.4 million, or a loss of $10.86 per ordinary share, for the twelve months ended December 31, 2005. The twelve months of 2005 included a net loss after tax of $1,865.1 million for the third and fourth quarter 2005 natural catastrophes and a net loss after tax of $808.9 million associated with the Winterthur Decision.

At December 31, 2006, net book value per ordinary share was $53.12 as compared with $44.31 at December 31, 2005.

Commenting on these results, President and Chief Executive Officer Brian M. O'Hara said: "I am very pleased to report that we have had excellent performance from each of our businesses and our investment operations. They have all contributed to record net income for both the quarter and the full year. Our operating return on equity was 20.1% for the year which was the main driver behind the 19.9% increase in book value for 2006. As XL enters its third decade, I believe our strengths in underwriting, risk management, investment and capital management will allow us to build on this momentum for the benefit of our shareholders".

SEGMENT HIGHLIGHTS - FOURTH QUARTER 2006 VERSUS FOURTH QUARTER 2005

Insurance General Operations

Underwriting profit for the quarter ended December 31, 2006 was $34.6 million compared with a loss of $1,092.8 million in the prior year period. The quarter ended December 31, 2005 included the pre-tax charge related to the Winterthur Decision of $834.2 million and the pre-tax net impact of the 2005 natural catastrophes of $285.1 million. See attached table for further details. In addition, the current quarter included a foreign exchange loss of $39.4 million as compared to a loss of $2.4 million in the prior year quarter.

Fourth quarter 2006 as compared to fourth quarter 2005 (excluding the impact of the natural catastrophes and Winterthur Decision in the fourth quarter 2005):

    * Gross premiums written decreased 1.1% primarily as a result of corporate
      risk management initiatives and fewer long term agreements.  Net
      premiums written increased by 6.6% primarily due to changes in
      reinsurance structure and retention in certain lines of business as well
      as timing of reinsurance cessions.
    * Net premiums earned decreased 1.5% reflecting lower net premiums written
      in prior periods.
    * The loss ratio was 62.0% as compared with 73.8%. The current quarter
      included favorable net prior year development of $20.1 million as
      opposed to adverse net prior year development of $137.9 million in the
      prior year quarter.
    * The underwriting expense ratio was 31.1% as compared with 23.8% due
      mainly to an increase in performance-based compensation costs in
      contrast to a reduction in such costs in the prior year quarter.

Reinsurance General Operations

Underwriting profit for the quarter ended December 31, 2006, was $158.4 million compared with an underwriting loss of $32.3 million for the prior year period which included the pre-tax net impact of catastrophes of $140.9 million. See attached table for further details. In addition, the current quarter included a foreign exchange gain of $23.0 million as opposed to a loss of $2.4 million in the prior year quarter.

Fourth quarter 2006 as compared to fourth quarter 2005 (excluding the impact of the catastrophes in the fourth quarter 2005):

    * Gross and net premiums written decreased 21.2% and 32.9% respectively,
      primarily due to the timing of certain premium renewals, premium
      adjustments and corporate risk management initiatives.
    * Net premiums earned decreased 11.2% reflecting the effects of lower net
      premiums written over the previous twenty four months.
    * The loss ratio was 46.5% compared with 56.6% in the prior year period
      driven primarily by favorable net prior year development of
      $87.2 million in the current quarter as compared with $21.0 million in
      the prior year quarter.
    * The underwriting expense ratio increased to 31.3% in the current quarter
      from 26.9% in the prior year quarter due mainly to an increase in
      performance-based compensation costs in contrast to a reduction in such
      costs in the prior year quarter.

Life Operations

Gross premiums written were $200.8 million for the current quarter, an increase of 39.5% from the prior year quarter primarily due to a single premium annuity contract of $79 million written in the current quarter. Net income from life operations was $18.8 million as compared with $9.8 million in the prior year quarter reflecting growth in the underlying business.

Financial Operations

* Financial lines

Total contribution from the segment was $17.2 million for the current quarter as compared with $36.1 million in the prior year quarter. Net losses included $20.2 million related primarily to incurred credit losses on certain structured financing policies retained within the financial lines segment following the initial public offering of Security Capital Assurance Ltd ("SCA"). Higher net spread income on structured products and net investment income were offset by lower income from structured derivatives.

* SCA

Net income for the segment was $23.0 million for the current quarter compared with $33.6 million in the prior year quarter. The current quarter included a 37% equity minority interest charge of $12.8 million. Higher gross and net premiums written versus the prior year quarter were due primarily to an increase in the volume and mix of upfront business while net premiums earned decreased 9.1% primarily due to a reduction in premium refundings. Higher net investment income was partially offset by an increase in operating expenses.

Investment Operations

Net investment income from general operations was $285.2 million in the quarter, an increase of 22.4% from the prior year quarter, or 37.3% excluding $25.3 million in interest received last year related to the Winterthur Decision. This increase was due primarily to a continued rise in average yields and a higher investment asset base.

Net income from investment affiliates was $94.4 million in the fourth quarter of 2006 compared with $38.4 million in the fourth quarter of 2005 due to strong returns in the alternative portfolio and continued contribution from private investments. In addition, net income from operating affiliates was $60.1 million in the fourth quarter of 2006 as compared with $24.9 million in the fourth quarter of 2005, the increase being primarily due to a successful liquidity event of one of the investment manager affiliates.

Net realized losses on investments were $63.0 million in the quarter, compared with net realized gains of $37.9 million in the prior year quarter. Net unrealized gains on investments, net of tax, were $410.5 million and $394.5 million, at December 31, 2006 and September 30, 2006, respectively.

Other Items

Total operating expenses were $365.4 million in the quarter, up from $223.6 million in the prior year quarter. The increase was due mainly to an increase in performance-based compensation in contrast to a reduction in such costs in the prior year quarter.

The Company will host a conference call to discuss its fourth quarter and full year 2006 results on Wednesday, February 7, 2007 at 10:00 a.m. Eastern time. The conference call can be accessed through a listen-only dial-in number or through a live webcast. To listen to the conference call, please dial (877) 422-4657 or (706) 679-0474, Conference ID# 5665106. The webcast will be available on XL's website located at www.xlgroup.com and will be archived on this site from approximately 1:00 p.m. Eastern time on February 7, 2007 through midnight Eastern time on March 7, 2007. A slide presentation accompanying the Company's discussion of its fourth quarter and full year 2006 results will also be available on the Company's website located at www.xlgroup.com beginning approximately 15 minutes before the commencement of the conference call.

A telephone replay of the conference call will be available beginning at approximately 1:00 p.m. Eastern time on February 7, 2007 until midnight Eastern time on February 28, 2007 by dialing (800) 642-1687 or (706) 645-9291, Conference ID # 5665106. An unaudited financial supplement relating to the Company's fourth quarter and full year 2006 results is available on its website located at www.xlgroup.com.

XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products and services to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. As of December 31, 2006, XL Capital Group Ltd had consolidated assets of approximately $59.3 billion and consolidated shareholders' equity of $10.1 billion. More information about XL Capital Ltd is available at www.xlgroup.com.

This press release contains forward-looking statements. Statements that are not historical facts, including statements about XL's beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates, and expectations. Actual results may differ materially from those included in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) changes in the size of XL's claims relating to hurricane and other catastrophe losses in 2005; (b) greater frequency or severity of claims and loss activity than XL's underwriting, reserving or investment practices anticipate based on historical experience or industry data; (c) trends in rates for property and casualty insurance and reinsurance; (d) developments in the world's financial and capital markets that adversely affect the performance of XL's investments or access to such markets; (e) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; and (f) the other factors set forth in XL's most recent reports on Form 10-K, Form 10-Q, and other documents on file with the Securities and Exchange Commission, as well as management's response to any of the aforementioned factors. XL undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future developments or otherwise.

                                XL Capital Ltd
                     SUMMARY CONSOLIDATED FINANCIAL DATA
                         (U.S. dollars in thousands)

                                  Three Months Ended       Twelve Months Ended
    Income Statement Data:            December 31              December 31
                                    2006        2005         2006        2005
    Revenues:
    Gross premiums written:
        - general operations  $1,610,207  $1,719,650   $8,654,878  $9,196,837
          - life  operations     200,796     143,893      597,025   2,274,520
      - financial operations     188,767     115,306      534,344     378,140

    Net premiums written:
        - general operations   1,276,646   1,304,905    6,546,349   7,024,111
           - life operations     190,798     134,877      558,548   2,236,903
      - financial operations     170,722     107,873      512,550     356,445

     Net premiums earned:
        - general operations   1,625,281   1,724,479    6,691,908   6,873,638
          - life  operations     191,018     135,071      559,395   2,237,721
      - financial operations      95,016      93,688      318,215     254,136
     Net investment income       522,539     432,741    1,978,184   1,475,039
     Net realized (losses)
      gains on investments       (62,963)     37,933     (116,458)    241,882
     Net realized and
      unrealized gains on
      derivatives                 22,483      13,639      101,183      28,858
     Net income from
      investment affiliates       94,424      38,371      269,036     154,844
     Fee and other income          8,646       3,564       31,732      19,297
             Total revenues   $2,496,444  $2,479,486   $9,833,195 $11,285,415
    Expenses:
    Net losses and loss
     expenses incurred          $981,786  $2,469,264   $4,238,638  $7,465,001
    Claims and policy benefits   238,450     190,116      769,811   2,479,364
    Acquisition costs            278,570     293,944    1,102,046   1,195,344
    Operating expenses           365,489     223,638    1,182,939     982,059
    Exchange losses               13,988       5,566       89,373      10,954
    Interest expense             139,386     128,049      552,275     403,849
    Amortization of
     intangible assets               420       2,248        2,355      10,752
             Total expenses   $2,018,089  $3,312,825   $7,937,437 $12,547,323

    Net income (loss) before
     minority interest,
     income tax and net
     income from
     operating affiliates       $478,355   $(833,339)  $1,895,758 $(1,261,908)

    Minority interest in
     net income of subsidiary     14,403       1,445       25,016       8,210
    Income tax                    42,917       1,972      219,645      49,284
    Net (income) from
     operating affiliates        (60,110)    (24,901)    (111,670)    (67,426)

    Net income (loss)           $481,145   $(811,855)  $1,762,767 $(1,251,976)
    Preference share dividends   (10,081)    (10,082)     (40,322)    (40,322)
    Net income (loss)
     available to ordinary
     shareholders               $471,064   $(821,937)  $1,722,445 $(1,292,298)


                                XL Capital Ltd
                     SUMMARY CONSOLIDATED FINANCIAL DATA
               (Shares in thousands, except per share amounts)

                                     Three Months Ended    Twelve Months Ended
    Income Statement Data              December 31            December 31
     (continued):                    2006      2005         2006      2005

    Weighted average number of
     ordinary shares and ordinary
     share equivalents:

                         Basic    179,099   149,177      178,793   141,406
                       Diluted    179,832   149,177      179,450   141,406

    Per Share Data:
    Net income (loss) available
     to ordinary shareholde         $2.62    ($5.51)       $9.60    ($9.14)

    Ratios -- General insurance
     and reinsurance operations:
    Loss ratio                       56.3%    140.3%        60.7%    107.1%
    Expense ratio                    31.2%     24.8%        27.8%     25.8%

    Combined ratio                   87.5%    165.1%        88.5%    132.9%


                                XL Capital Ltd
                     SUMMARY CONSOLIDATED FINANCIAL DATA
            (U.S. dollars in thousands, except per share amounts)


    Balance Sheet Data:                   As at                    As at
                                    December 31, 2006        December 31, 2005

    Total investments available
     for sale                          $39,350,983              $35,724,439

    Cash and cash equivalents            2,223,748                3,693,475

    Investments in affiliates            2,308,781                2,046,721

    Unpaid losses and loss
     expenses recoverable                5,027,772                6,441,522

    Total assets                        59,308,870               58,454,901


    Unpaid losses and loss expenses     23,080,142               23,767,672

    Deposit liabilities                  7,857,827                8,240,987

    Future policy benefit reserves       6,290,936                5,606,461

    Unearned premiums                    5,652,897                5,388,996

    Notes payable and debt               3,368,376                3,412,698

    Minority interest in equity
     of consolidated subsidiaries          562,121                   54,389


    Total shareholders' equity          10,131,166                8,471,811

    Book value per ordinary share           $53.12                   $44.31


                                XL Capital Ltd

SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES AND THE CHARGE RELATED

TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION IN THE FOURTH QUARTER 2005

                          (U.S. dollars in millions)

    Three Months Ended
    December 31, 2005     Gross  Reinsurance   Net   Reinstatement  Net impact
                           Loss   Recoveries   Loss  Premium        Pre tax
    Insurance
      Hurricane Katrina  $243.7    $149.6     $94.1    $(4.3)         $98.4
         Hurricane Rita   236.8     161.8      75.0     (2.1)          77.1
        Hurricane Wilma   172.7      64.3     108.4     (1.2)         109.6
      Winterthur charge       -    (834.2)    834.2        -          834.2
                         $653.2   $(458.5) $1,111.7    $(7.6)      $1,119.3
    Reinsurance
      Hurricane Katrina   $48.0     $55.5     $(7.5)    $4.8         $(12.3)
         Hurricane Rita    33.9      14.6      19.3      4.9           14.4
        Hurricane Wilma   214.4      75.7     138.7      6.2          132.5
     Other catastrophes
     (Note 1)               6.3         -       6.3        -            6.3
                         $302.6    $145.8    $156.8    $15.9         $140.9
    Financial products
     and services
      Hurricane Katrina   $23.6       $ -     $23.6    $23.6            $ -

    TOTAL - Pre tax
      Hurricane Katrina  $315.3    $205.1    $110.2    $24.1          $86.1
         Hurricane Rita   270.7     176.4      94.3      2.8           91.5
        Hurricane Wilma   387.1     140.0     247.1      5.0          242.1
     Wintherthur charge       -    (834.2)    834.2        -          834.2
     Other catastrophes
      (Note 1)              6.3         -       6.3        -            6.3
                         $979.4   $(312.7) $1,292.1    $31.9       $1,260.2

    Net investment income                                             $25.3
               Tax impact                                              35.3
         TOTAL - Post tax                                          $1,199.6

    Notes
    1. Includes European floods


                                XL Capital Ltd

SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES AND THE CHARGE RELATED

   TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION IN FOURTH QUARTER 2005
                          (U.S. dollars in millions)

    GENERAL OPERATIONS  Three Months    Three Months Ended December 31, 2005
                           Ended
                        December 31,
                           2006
                                                                   Excluding
                                                    Catastrophes  Catastrophes
                                                        and           and
                                                     Winterthur    Winterthur
                          Total        As reported     charge        charge
    INSURANCE
    Gross premiums
     written           $1,348.4          $1,364.3        $1.2        $1,363.1
    Net premiums
     written            1,096.9           1,021.1        (7.6)        1,028.7

    Net premiums
     earned             1,025.1           1,032.8        (7.6)        1,040.4
    Fee and other
     income                 4.0               2.9           -             2.9

    Net losses and
     loss expenses        635.8           1,879.3     1,111.7           767.6
    Acquisition costs     129.5             128.7           -           128.7
    Operating expenses    189.8             118.1           -           118.1
    Exchange losses        39.4               2.4           -             2.4
    Underwriting profit
     (loss)               $34.6         $(1,092.8)  $(1,119.3)          $26.5

    Loss ratio             62.0%            182.0%                       73.8%
    Combined ratio         93.1%            206.0%                       97.5%

    REINSURANCE
    Gross premiums
     written             $261.8            $355.3       $23.0          $332.3
    Net premiums
     written              179.8             283.8        15.9           267.9

    Net premiums
     earned               600.1             691.7        15.9           675.8
    Fee and other
     income                 2.4                 -           -               -

    Net losses and
     loss expenses        279.2             539.6       156.8           382.8
    Acquisition costs     124.4             148.0           -           148.0
    Operating expenses     63.5              34.0           -            34.0
    Exchange (gains)
     losses               (23.0)              2.4           -             2.4
    Underwriting profit
     (loss)              $158.4            $(32.3)    $(140.9)         $108.6

    Loss ratio             46.5%             78.0%                       56.6%
    Combined ratio         77.8%            104.3%                       83.6%

    TOTAL
    Gross premiums
     written           $1,610.2          $1,719.6       $24.2        $1,695.4
    Net premiums
     written            1,276.7           1,304.9         8.3         1,296.6

    Net premiums
     earned             1,625.2           1,724.5         8.3         1,716.2
    Fee and other
     income                 6.4               2.9           -             2.9

    Net losses and
     loss expenses        915.0           2,418.9     1,268.5         1,150.4
    Acquisition costs     253.9             276.7           -           276.7
    Operating expenses    253.3             152.1           -           152.1
    Exchange losses        16.4               4.8           -             4.8
    Underwriting profit
    (loss)               $193.0         $(1,125.1)  $(1,260.2)         $135.1

    Loss ratio             56.3%            140.3%                       67.0%
    Combined ratio         87.5%            165.1%                       92.0%


                                XL Capital Ltd
            SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES
             AND THE CHARGE RELATED TO THE WINTERTHUR INDEPENDENT
              ACTUARIAL DECISION IN YEAR ENDED DECEMBER 31, 2005
                          (U.S. dollars in millions)

    Twelve Months Ended
     December 31, 2005     Gross  Reinsurance  Net   Reinstatement  Net impact
                            Loss   Recoveries  Loss  Premium        Pre tax
    Insurance
      Hurricane Katrina  $1,339.7   $748.6    $591.1  $(74.6)        $665.7
         Hurricane Rita     521.9    312.9     209.0   (13.3)         222.3
        Hurricane Wilma     172.7     64.3     108.4    (1.2)         109.6
      Winterthur charge         -   (834.2)    834.2       -          834.2
     Other catastrophes
     (Note 1)                40.2      1.7      38.5       -           38.5
                         $2,074.5   $293.3  $1,781.2  $(89.1)      $1,870.3
    Reinsurance
      Hurricane Katrina  $1,128.0   $495.2    $632.8   $16.3         $616.5
         Hurricane Rita     232.4     83.5     148.9     8.8          140.1
        Hurricane Wilma     214.4     75.7     138.7     6.2          132.5
     Other catastrophes
      (Note 1)               57.5        -      57.5     3.4           54.1
                         $1,632.3   $654.4    $977.9   $34.7         $943.2
    Financial products
     and services
      Hurricane Katrina     $45.0      $ -     $45.0   $23.6          $21.4

    TOTAL - Pre tax
      Hurricane Katrina  $2,512.7 $1,243.8  $1,268.9  $(34.7)      $1,303.6
         Hurricane Rita     754.3    396.4     357.9    (4.5)         362.4
        Hurricane Wilma     387.1    140.0     247.1     5.0          242.1
     Wintherthur charge         -   (834.2)    834.2       -          834.2
     Other catastrophes
      (Note 1)               97.7      1.7      96.0     3.4           92.6
                         $3,751.8   $947.7  $2,804.1  $(30.8)      $2,834.9

    Net investment income                                             $25.3
               Tax impact                                             135.6
         TOTAL - Post tax                                          $2,674.0

    Notes

1. Includes Hurricanes Dennis, Emily, Ophelia, European and Mumbai Floods and Typhoon Mawar.

                                XL Capital Ltd
            SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES
             AND THE CHARGE RELATED TO THE WINTERTHUR INDEPENDENT
            ACTUARIAL DECISION IN THE YEAR ENDED DECEMBER 31, 2005
                          (U.S. dollars in millions)

    GENERAL OPERATIONS  Twelve Months    Twelve Months Ended December 31, 2005
                           Ended
                        December 31,
                           2006
                                                                   Excluding
                                                    Catastrophes  Catastrophes
                                                        and           and

                                                     Winterthur    Winterthur
                          Total        As reported     charge        charge
    INSURANCE
    Gross premiums
     written           $5,570.1          $5,785.8         $ -        $5,785.8
    Net premiums
     written            4,145.2           4,248.1       (89.1)        4,337.2

    Net premiums
     earned             4,100.6           4,102.7       (89.1)        4,191.8
    Fee and other
     income                21.3               4.2           -             4.2

    Net losses and
     loss expenses      2,634.2           4,595.6     1,781.2         2,814.4
    Acquisition costs     486.9             505.6           -           505.6
    Operating expenses    638.8             517.8           -           517.8
    Exchange losses
     (gains)              140.1             (25.5)          -           (25.5)
    Underwriting profit
     (loss)              $221.9         $(1,486.6)  $(1,870.3)         $383.7

    Loss ratio             64.2%            112.0%                       67.1%
    Combined ratio         91.7%            137.0%                       91.6%

    REINSURANCE
    Gross premiums
     written           $3,084.7          $3,411.1      $135.3        $3,275.8
    Net premiums
     written            2,401.1           2,776.0        34.7         2,741.3

    Net premiums
     earned             2,591.3           2,770.9        34.7         2,736.2
    Fee and other
     income                 3.0              (0.3)          -            (0.3)

    Net losses and
     loss expenses      1,426.8           2,763.4       977.9         1,785.5
    Acquisition costs     537.4             600.6           -           600.6
    Operating expenses    196.5             155.1           -           155.1
    Exchange (gains)
     losses               (43.1)             33.1           -            33.1
    Underwriting profit
     (loss)              $476.7           $(781.6)    $(943.2)         $161.6

    Loss ratio             55.1%             99.7%                       65.3%
    Combined ratio         83.4%            127.0%                       92.9%

    TOTAL
    Gross premiums
     written           $8,654.8          $9,196.9      $135.3        $9,061.6
    Net premiums
     written            6,546.3           7,024.1       (54.4)        7,078.5

    Net premiums
     earned             6,691.9           6,873.6       (54.4)        6,928.0
    Fee and other
     income                24.3               3.9           -             3.9

    Net losses and
     loss expenses      4,061.0           7,359.0     2,759.1         4,599.9
    Acquisition costs   1,024.3           1,106.2           -         1,106.2
    Operating expenses    835.3             672.9           -           672.9
    Exchange losses        97.0               7.6           -             7.6
    Underwriting profit
     (loss)              $698.6         $(2,268.2)  $(2,813.5)         $545.3

    Loss ratio             60.7%            107.1%                       66.4%
    Combined ratio         88.5%            132.9%                       92.1%


    XL Capital Ltd
    RECONCILIATION

The following is a reconciliation of the Company's (i) net income (loss) available to ordinary shareholders to 'net income (loss) excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax' (which is a non-GAAP measure, the "Exclusions") and (ii) annualized return on ordinary shareholders' equity (based on net income (loss) minus the Exclusions) to average ordinary shareholders' equity for the three and twelve months ended December 31, 2006 and 2005.

    (U.S. dollars in millions,
    except per share amounts)    Three Months Ended        Twelve Months Ended
                                    December 31               December 31
                                   2006       2005          2006       2005

    Net income (loss) available
     to ordinary shareholders    $471.1    $(821.9)      $1,722.4  $(1,292.3)

    Net realized losses (gains)
     on investments, net of tax    61.8      (34.9)         113.4     (232.7)

    Net realized and unrealized
     (gains) losses on investment
     derivatives, net of tax      (18.7)      (4.7)         (71.6)      17.3

    Net realized and unrealized
     (gains) losses on credit
     and structured financial
     derivatives, net of tax       (0.4)      (6.7)          (0.9)     (27.7)

    Net income (loss) excluding
     net realized gains and
     losses (Note 1)             $513.8    $(868.2)      $1,763.3  $(1,535.4)

    Per ordinary share results:
    Net income (loss) available
     to ordinary shareholders     $2.62     $(5.51)         $9.60     $(9.14)

    Net income (loss) excluding
     net realized gains and
     losses (Note 1)              $2.86     $(5.82)         $9.83    $(10.86)

    Weighted average ordinary
     shares outstanding:
    Basic                       179,099    149,177        178,793    141,406
    Diluted                     179,832    149,177        179,450    141,406

    Return on Ordinary
     Shareholders' Equity:
    Average ordinary
     shareholders' equity      $9,310.1   $7,238.1       $8,784.0   $7,587.8

    Net income (loss) excluding
     net realized gains and
     losses (Note 1)             $513.8    $(868.2)      $1,763.3  $(1,535.4)

    Annualized Return on
     Ordinary Shareholders'
     Equity - Net income
     excluding net realized
     gains and losses (Note 1)     22.1%        NM           20.1%        NM

Note 1: Defined as "net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax".

    NM = Not Meaningful


    Comment on Regulation G

This press release contains the presentation of (i) 'net income (loss) excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax' and (ii) annualized return on ordinary shareholders' equity (based on net income (loss) minus the Exclusions) to average ordinary shareholders' equity. These items are "non-GAAP financial measures" as defined in Regulation G. The reconciliation of such measures to the most directly comparable GAAP financial measures in accordance with Regulation G is included above.

XL presents its operations in the way it believes will be most meaningful and useful to investors, analysts, rating agencies and others who use XL's financial information in evaluating XL's performance. This presentation includes the use of 'net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax'. Investment derivatives include all derivatives entered into by XL other than weather and energy and credit derivatives (discussed further below).

Although the investment of premiums to generate income (or loss) and realized capital gains (or losses) is an integral part of XL's operations, the determination to realize capital gains (or losses) is independent of the underwriting process. In addition, under applicable GAAP accounting requirements, losses can be created as the result of other than temporary declines in value without actual realization. In this regard, certain users of XL's financial information, including certain rating agencies, evaluate earnings before tax and capital gains to understand the profitability of the recurring sources of income without the effects of these two variables. Furthermore, these users believe that, for many companies, the timing of the realization of capital gains is largely opportunistic and are a function of economic and interest rate conditions.

In addition, with respect to credit derivatives, because XL generally holds its financial guaranty contracts written in credit default derivative form to maturity, the net effects of the changes in fair value of these credit derivatives are excluded (similar with other companies in the financial guarantee business) as the changes in fair value each quarter are not indicative of underlying business performance of XL's financial guaranty operations. Unlike these credit derivatives, XL's weather and energy derivatives are actively traded (i.e., they are not held to maturity) and are, therefore, not excluded from net income as any gains or losses from this business are considered by management when evaluating and managing the underlying business.

In summary, XL evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income (loss), XL believes that showing net income (loss) exclusive of the items mentioned above enables investors and other users of XL's financial information to analyze XL's performance in a manner similar to how management of XL analyzes performance. In this regard, XL believes that providing only a GAAP presentation of net income (loss) makes it much more difficult for users of XL's financial information to evaluate XL's underlying business. Also, as stated above, XL believes that the equity analysts and certain rating agencies that follow XL (and the insurance industry as a whole) exclude these items from their analyses for the same reasons and they request that XL provide this non-GAAP financial information on a regular basis.

Return on average ordinary shareholder's equity ("ROE") (minus the Exclusions) is a widely used measure of any company's profitability. Annualized return on average ordinary shareholders' equity (minus the Exclusions) is calculated by dividing annualized net income minus the Exclusions for any period by the average of the opening and closing ordinary shareholder's equity. XL establishes target ROE's for its total operations, segments and lines of business. If XL's ROE return targets are not met with respect to any line of business over time, XL seeks to re-evaluate these lines. In addition, XL's compensation of its senior officers is significantly dependant on the achievement of the Company's performance goals to enhance shareholder value which include ROE.

1. Defined as net income/loss excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, herein referred to as "net income/loss excluding net realized gains and losses". "Net income/loss excluding net realized gains and losses" is a non-GAAP measure. See the schedule entitled "Reconciliation" at the end of this release for a reconciliation of net income/loss excluding net realized gains and losses to net income available to ordinary shareholders.

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