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XL Capital Ltd reports fourth quarter 2001 results

HAMILTON, BERMUDA, February 12, 2002 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported a net loss of $83.6 million, or a loss of $0.64 per share in the fourth quarter of 2001, compared with net income of $0.6 million, or income of $0.01 per share, in 2000's fourth quarter. The net operating loss for the fourth quarter ended December 31, 2001 was $6.1 million, or a loss of $0.05 per share, compared to net operating income of $143.0 million, or income of $1.13 per share in the fourth quarter a year ago. Economic operating income was $8.2 million, or $0.06 per share, in the fourth quarter of 2001 compared with $160.1 million, or $1.26 per share, during the same period in 2000. These results reflect the inclusion of the acquired Winterthur International operations from July 1, 2001.

The Company's 2001 fourth quarter results primarily reflect previously announced adverse prior period loss development on its U.S. casualty reinsurance book, losses related to the bankruptcy of Enron Corp., American Airlines Flight 587 and several large European property losses.

For the year ended December 31, 2001, the net loss was $576.1 million, or a loss of $4.55 per share, compared with net income of $506.4 million, or income of $4.03 per share, for the year ended December 31, 2000. The net operating loss for 2001 was $451.2 million, or a loss of $3.56 per share, compared with net operating income of $567.6 million, or income of $4.52 per share, for the year ended December 31, 2000. The economic operating loss was $392.6 million, or a loss of $3.10 per share, during 2001 compared with economic operating income of $626.2 million, or income of $4.98 per share, for 2000.

Summary unaudited consolidated financial data for the three months and year ended December 31 for each of 2001 and 2000 is set forth below (in millions, except per share amounts):

                                           Three months      Year ended 
                                          ended December 31   December 31
                                             (Unaudited)      (Unaudited)

                                       2001     2000      2001      2000
Net premiums earned                 $ 891.5  $ 497.4 $ 2,779.9 $ 2,035.2
Net (loss) income                     (83.6)     0.6    (576.1)    506.4
Net operating (loss) income (a)        (6.1)   143.0    (451.2)    567.6
Economic operating income (loss) (b)    8.2    160.1    (392.6)    626.2
                                
Per share results:                              
Net (loss) income                    $ (0.64)  $ 0.01   $ (4.55)   $ 4.03
Net operating (loss) income (a)        (0.05)    1.13     (3.56)     4.52
Economic operating income (loss) (b)    0.06     1.26     (3.10)     4.98
                                
Average shares outstanding  Basic (c) 130.6    124.3     126.7     124.5
                            Diluted   133.2    126.9     128.7     125.7

Notes: (a) Net operating (loss) income is net (loss) income excluding net realized gains and losses on investments, net realized and unrealized gains and losses on derivatives and one-time charges, including realignment charges in 2000, net of tax. (b) Economic operating income (loss) is net operating (loss) income excluding amortization of intangible assets. (c) Basic weighted average shares outstanding are used to calculate losses per share.

Commenting on the fourth quarter results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated, "The underwriting results for 2001 were the worst ever for the property and casualty industry. Although our fourth quarter results are disappointing, primarily reflecting the impact of certain prior period loss reserve adjustments and a number of large losses, we are pleased to note significant growth in premiums written, due largely to our expanded global platform and demonstrating our strength in the upward turn in the underwriting cycle."

"The changes in the market are allowing us to demonstrate underwriting leadership while obtaining substantial price increases in all of our business lines during the important January 1 renewal season on a much larger base than a year ago," Mr. O'Hara noted.

Total revenues were $1.7 billion and $0.6 billion for the quarters ended December 31, 2001 and 2000, respectively. For the years ended December 31, 2001 and 2000, revenues were $4.1 billion and $2.7 billion, respectively.

Non-life gross premiums written were $1.5 billion for the fourth quarter of 2001, compared with $0.8 billion for the fourth quarter of 2000. Non-life net premiums earned were $891.5 million in the fourth quarter of 2001, of which $172.0 million relates to XL Winterthur International, versus $497.4 million in the fourth quarter of 2000.

For the year ended December 31, 2001, non-life gross premiums written were $4.8 billion compared with $3.1 billion in 2000. Non-life net premiums earned were $2.8 billion in 2001, of which $353.1 million relates to XL Winterthur International versus $2.0 billion in 2000.

Life premiums assumed in the fourth quarter of 2001 were $649.3 million and for the year were $695.6 million. There were no life premiums assumed in 2000.

Net investment income was $149.6 million in the fourth quarter of 2001 compared with $142.9 million in 2000's fourth quarter. Net realized losses on investments and net realized and unrealized losses on derivatives in the fourth quarters of 2001 and 2000 were $69.9 million and $24.2 million, respectively.

Net investment income was $562.6 million during 2001, compared with $542.5 million in 2000. Net realized losses on investments and net realized and unrealized losses on derivatives in the year ended December 31, 2001 were $105.4 million compared to net gains of $50.6 million in the year ended December 31, 2000.

The Company's equity in the net earnings of its insurance and investment affiliates for the fourth quarter was $10.1 million in 2001 compared to $12.7 million in the fourth quarter of 2000. The Company's equity in the net earnings of its insurance and investment affiliates was $75.3 million in the 2001 fiscal year compared to $74.4 million in the 2000 fiscal year.

Total assets as at December 31, 2001 were $28.0 billion compared with $16.9 billion as at December 31, 2000. Shareholders' equity as at December 31, 2001 was $5.4 billion compared with $5.6 billion as at December 31, 2000. Fully diluted book value per share as at December 31, 2001 was $40.82 compared with $44.78 as at December 31, 2000.

In the fourth quarter of 2001, the combined ratio was 128.6% compared with 139.0% in the fourth quarter of 2000. The loss ratios were 94.8% and 93.1% in the fourth quarters of 2001 and 2000, respectively, and the corresponding expense ratios were 33.8% and 45.9%, respectively.

The combined ratio for the Company was 139.9% in the full year 2001 compared with 106.8% in 2000. The loss ratios were 105.0% and 70.4% in 2001 and 2000, respectively, with the corresponding expense ratios being 34.9% and 36.4%, respectively.

In the fourth quarter of 2001, the Company issued 9.2 million shares for total net proceeds of $787.7 million. During the year ended December 31, 2001, the Company repurchased 1.5 million of its shares at an average price of $76.40 per share. XL has approximately $135.4 million remaining in its current share repurchase authorization.

A live on-line webcast of a call with analysts and investors will be held at 8:00 a.m. Eastern Time on Wednesday, February 13, 2002 to review the fourth quarter results at www.xlgroup.com. XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products to industrial, commercial and professional service firms,

insurance companies and other enterprises on a worldwide basis. Additional unaudited supplemental financial information relating to the Company's 2001, 2000 and 1999 results are available on its web site: www.xlgroup.com.

This press release contains forward-looking statements that involve inherent risks and uncertainties. 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 projected 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) rate increases and improvements in terms and conditions may not be as large or significant as XL is currently projecting; (b) the size of XL's claims may change due to the preliminary nature of reports and estimates of loss and damage; (c) the timely and full recoverability of reinsurance placed by XL with third parties; (d) the timing of claims being faster or the receipt of reinsurance recoverables being slower than anticipated by XL; (e) increased competition based on pricing, capacity, coverage terms or other factors; (f) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than XL's underwriting, reserving or investment practices anticipate based on historical experience or industry data; (g) developments in the world's financial and capital markets which adversely affect the performance of XL's investments and XL's access to such markets; (h) the potential impact of U.S. solutions to make available insurance coverage for acts of terrorism; (i) developments in the Enron bankruptcy proceedings or other developments related to Enron; (j) the effects of mergers, acquisitions or divestitures; (k) changes in rating agency policy or practices; (l) changes in accounting policies or practices; (m) legislative or regulatory developments; (n) changes in general economic conditions, including inflation, foreign currency exchange rates and other factors; (o) the effects of business disruption or economic contraction due to terrorism or other hostilities; and (p) the other factors set forth in XL's most recent report on Form 10-K and XL's other documents on file with the Securities and Exchange Commission. XL undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

# # #
                                  XL Capital Ltd
                       SUMMARY CONSOLIDATED FINANCIAL DATA
                     (In thousands, except per share amounts)

                            Three Months Ended             Year Ended
                                December 31                December 31
                                (Unaudited)                (Unaudited)
                             2001          2000        2001           2000
    Income Statement Data:

    Revenues
      Net premiums earned  891,512       497,421    2,779,927     2,035,240
      Life premiums
       assumed             649,348            --      695,595            --
      Net investment
       income              149,637       142,909      562,606       542,500
      Equity in net income
       of investment
       affiliates           16,234        12,164       80,580        70,032
      Net realized (losses)
       gains on
       investments        (63,593)       (7,134)     (93,237)        45,090
      Net realized and
       unrealized (losses)
       gains on
       derivatives         (6,284)      (17,103)     (12,176)         5,481
      Fee income and other  16,912         5,958       43,464        14,793
                         1,653,766       634,215    4,056,759     2,713,136

    Expenses
      Net losses and
       loss expenses       845,171       463,185    2,918,898     1,432,559
      Change in policy
       benefit reserves    652,202            --      698,675            --
      Acquisition costs,
       operating expenses,
       and exchange gains
       and losses          327,167       189,800    1,073,903       743,067
      Interest expense      23,112         8,428       65,350        32,147
      Amortization of
       intangible assets    14,353        17,188       58,569        58,597
                         1,862,005       678,601    4,815,395     2,266,370

    Net (loss) income
      before items below (208,239)      (44,386)    (758,636)       446,766

    Income tax (benefit)
      expense            (132,710)      (45,090)    (189,914)      (56,356)
    Minority interest        1,986           565        2,113         1,093
    Equity in net loss
      (income) of insurance
      affiliates             6,123         (509)        5,300       (4,323)

    Net (loss) income    $(83,638)          $648   $(576,135)      $506,352


    Weighted average number
      of ordinary shares and
      ordinary share
      equivalents
        - Basic            130,625       124,266      126,676       124,503
        - Diluted          133,238       126,911      128,683       125,697

    Per Share Data:
      Net (loss) income    $(0.64)         $0.01      $(4.55)         $4.03
      Net losses (gains)
       on investments,
       derivatives and
       one time charges,
       after tax              0.59          1.12         0.99          0.49
      Net operating
       (loss) income       $(0.05)        $ 1.13     $ (3.56)        $ 4.52
      Amortization of
       intangible assets      0.11          0.13         0.46          0.46
      Economic operating
       income (loss)        $ 0.06        $ 1.26     $ (3.10)        $ 4.98


                                  XL Capital Ltd
                       SUMMARY CONSOLIDATED FINANCIAL DATA

                     (In thousands, except per share amounts)

                                   (Unaudited)

                                                       As at          As at
                                                December 31,   December 31,
                                                        2001           2000

    Balance Sheet Data:

    Total investments available for sale         $12,429,845     $9,501,548

    Net payable for investments purchased          1,247,027      1,372,476

    Cash and cash equivalents                      1,863,861        930,469

    Investments in affiliates                      1,037,344        792,723

    Intangible assets                              1,616,943      1,591,108

    Total assets                                  27,963,075     16,941,952

    Unpaid losses and loss expenses               11,825,680      5,672,062

    Deposit liabilities and policy
      benefit reserves                             2,374,164      1,209,926

    Notes payable and debt                         1,604,877        450,032

    Shareholders' equity                           5,437,184      5,573,668

    Fully diluted book value per share                $40.82         $44.78


                                XL Capital Ltd

                      SUPPLEMENTARY SEGMENT INFORMATION
                                (In thousands)
                                 (Unaudited)

                            FOR THE QUARTER ENDED
                              December 31, 2001


                                                          Financial
                                        Total             Products &
                  Insurance  Lloyd's Insurance Reinsurance Services    Total
    Non-Life:
    Gross premiums
     written       $746,341  $211,796  $958,137  $483,717  $38,106 $1,479,960

    Net premiums
     written        473,994   187,758   661,752   182,689   31,854    876,295

    Net premiums
     earned         422,228   176,606   598,834   273,600   19,078    891,512

    Fee income
     and other        8,825      (621)    8,204    (2,156)  10,864     16,912

    Net losses and
     loss expenses  275,540   124,311   399,851   433,922   11,398    845,171
    Acquisition
     costs           76,439    52,270   128,709    73,798    1,274    203,781
    Operating
     expenses        53,282     4,834    58,116    26,316   13,371     97,803
    Exchange (gains)
     losses            (290)    1,151       861    (2,312)      --     (1,451)

    Life:
    Life premiums
     assumed             --        --        --   649,348       --    649,348
    Change in policy
     benefit reserves    --        --        --   652,202       --    652,202

    Underwriting
     profit (loss)  $26,082   $(6,581)  $19,501 $(263,134)  $3,899  $(239,734)

    Underwriting
     loss                                                            (239,734)
    Net investment
     income                                                           149,637
    Equity in net
     income of
     insurance and
     investment
     affiliates                                                        10,111
    Corporate, taxes
     and other                                                         88,197

    Economic
     operating income                                                  $8,211

    Loss and loss
     expense ratio     65.3%     70.4%     66.8%    158.6%    59.7%      94.8%
    Underwriting
     expense ratio     30.7%     32.3%     31.2%     36.6%    76.8%      33.8%
    Combined ratio     96.0%    102.7%     98.0%    195.2%   136.5%     128.6%

     NOTES:
     1.  Ratios are based upon net premiums earned, excluding fee income and
         other.
     2.  The underwriting expense ratio excludes exchange gains and losses.
     3.  Economic operating income excludes net realized gains and losses on
         investments, net realized and unrealized gains and losses on
         derivatives, one-time charges, net of tax, and amortization of
         intangible assets.


                                XL Capital Ltd

                      SUPPLEMENTARY SEGMENT INFORMATION
                                (In thousands)
                                 (Unaudited)
                            FOR THE QUARTER ENDED
                              December 31, 2000

                                                          Financial
                                        Total             Products &
                  Insurance  Lloyd's Insurance Reinsurance Services    Total
    Non-Life:
    Gross premiums
     written       $489,991   $86,695  $576,686  $195,681   $4,617   $776,984

    Net premiums
     written        306,343    51,435   357,778   102,253    4,099    464,130

    Net premiums
     earned         250,934    66,226   317,160   175,012    5,249    497,421

    Fee income
     and other        2,339    (2,972)     (633)     (968)   7,559      5,958

    Net losses and
     loss expenses  199,341    55,758   255,099   206,675    1,411    463,185
    Acquisition
     costs           42,437    31,707    74,144    62,067      201    136,412
    Operating
     expenses        35,533    12,256    47,789    31,678   12,360     91,827
    Exchange (gains)
     losses            (259)   (2,789)   (3,048)    2,604       --       (444)

    Underwriting
     profit (loss) $(23,779) $(33,678) $(57,457)$(128,980) $(1,164) $(187,601)

    Underwriting
     profit                                                          (187,601)
    Net investment
     income                                                           142,909
    Equity in net
     income of
     insurance and
     investment
     affiliates                                                        12,673
    Corporate, taxes
     and other                                                        192,159

    Economic operating
     income                                                          $160,140

    Loss and loss
     expense ratio     79.4%     84.2%     80.4%    118.1%    26.9%      93.1%
    Underwriting
     expense ratio     31.1%     66.4%     38.5%     53.6%   239.3%      45.9%
    Combined ratio    110.5%    150.6%    118.9%    171.7%   266.2%     139.0%

     NOTES:
     1.  Ratios are based upon net premiums earned, excluding fee income and
         other.
     2.  The underwriting expense ratio excludes exchange gains and losses.
     3.  The combined ratio for the financial services segment would have been
         124.9% if credit default swap fee income was included in net premiums
         earned for purposes of calculating the expense ratio.
     4.  Net losses incurred for the insurance segment include, and the
         reinsurance segment exclude, $11.2 million relating to an
         intercompany stop loss arrangement. Consolidated results are not
         affected. The loss and loss expense ratio would have been 75.0% and
         124.5% and the underwriting loss would have been $12.6 million and
         $140.2 million in the insurance and reinsurance segments,
         respectively, had this stop loss arrangement not been in place.
     5.  Economic operating income excludes net realized gains and losses on
         investments, net realized and unrealized gains and losses on
         derivatives, one-time charges, including realignment charges, net of
         tax, and amortization of intangible assets.


                                XL Capital Ltd

                      SUPPLEMENTARY SEGMENT INFORMATION
                                (In thousands)
                                 (Unaudited)
                              FOR THE YEAR ENDED
                              December 31, 2001

                                                          Financial
                                      Total               Products &
                Insurance  Lloyd's  Insurance Reinsurance Services    Total
    Non-Life:
    Gross premiums
     written  $2,168,325  $693,016 $2,861,341 $1,818,491 $103,890  $4,783,722

    Net premiums
     written   1,281,124   537,614  1,818,738  1,012,668   97,020   2,928,426

    Net premiums
     earned    1,222,196   481,307  1,703,503  1,029,618   46,806   2,779,927

    Fee income
     and other    22,065    (3,707)    18,358     (7,180)  32,286      43,464

    Net losses and
     loss
     expenses    859,812   610,823  1,470,635  1,428,772   19,491   2,918,898
    Acquisition
     costs       187,443   155,804    343,247    292,069    3,730     639,046
    Operating
     expenses    178,530    22,215    200,745     87,169   42,404     330,318
    Exchange
     losses        4,924     3,198      8,122      4,062       --      12,184

    Life:
    Life premiums
     assumed          --        --         --    695,595       --     695,595
    Change in policy
     benefit reserves --        --         --    698,675       --     698,675

    Underwriting
    profit
    (loss)       $13,552 $(314,440) $(300,888) $(792,714) $13,467 $(1,080,135)

    Underwriting
     loss                                                          (1,080,135)
    Net investment
     income                                                           562,606
    Equity in net
     income of
     insurance and
     investment
     affiliates                                                        75,280
    Corporate,
     taxes and other                                                   49,632

    Economic
     operating loss                                                 $(392,617)

    Loss and loss
     expense
     ratio          70.4%    126.9%      86.3%     138.8%    41.6%      105.0%
    Underwriting
     expense ratio  29.9%     37.0%      31.9%      36.8%    98.6%       34.9%
    Combined ratio 100.3%    163.9%     118.2%     175.6%   140.2%      139.9%

     NOTES:
     1.  Ratios are based upon net premiums earned, excluding fee income and
         other.
     2.  The underwriting expense ratio excludes exchange gains and losses.
     3.  Economic operating loss excludes net realized gains and losses on
         investments, net realized and unrealized gains and losses on
         derivatives, one-time charges, net of tax, and amortization of
         intangible assets.


                                XL Capital Ltd

                      SUPPLEMENTARY SEGMENT INFORMATION
                                (In thousands)
                                 (Unaudited)
                              FOR THE YEAR ENDED
                              December 31, 2000

                                                          Financial
                                      Total               Products &
                Insurance  Lloyd's  Insurance Reinsurance Services    Total
    Non-Life:
    Gross premiums
     written  $1,335,802  $486,640 $1,822,442 $1,251,221  $55,368  $3,129,031

    Net premiums
     written     832,171   311,814  1,143,985    919,101   53,154   2,116,240

    Net premiums
     earned      726,506   357,824  1,084,330    927,195   23,715   2,035,240

    Fee income
     and other     7,692    (6,626)     1,066     (2,197)  15,924      14,793

    Net losses and
     loss
     expenses    502,898   260,372    763,270    663,173    6,116   1,432,559
    Acquisition
     costs       117,251   119,870    237,121    247,352    1,323     485,796
    Operating
     expenses     94,129    28,727    122,856    102,132   29,969     254,957
    Exchange
     (gains)
     losses       (2,344)   (5,986)    (8,330)     3,868       --      (4,462)

    Underwriting
     profit
     (loss)      $22,264  $(51,785)  $(29,521)  $(91,527)  $2,231   $(118,817)

    Underwriting
     profit                                                          (118,817)
    Net investment
     income                                                           542,500
    Equity in net
     income of
     insurance and
     investment
     affiliates                                                        74,355
    Corporate, taxes
     and other                                                        128,136

    Economic
     operating
     income                                                          $626,174

    Loss and loss
     expense ratio  69.2%     72.8%      70.4%      71.5%    25.8%       70.4%
    Underwriting
     expense
     ratio          29.1%     41.5%      33.2%      37.7%   131.9%       36.4%
    Combined ratio  98.3%    114.3%     103.6%     109.2%   157.7%      106.8%

     NOTES:
     1.  Ratios are based upon net premiums earned, excluding fee income and
         other.
     2.  The underwriting expense ratio excludes exchange gains and losses.
     3.  The combined ratio for the financial services segment would have been
         107.6% if credit default swap fee income was included with net
         premiums earned for purposes of calculating the expense ratio.
     4.  Net losses incurred for the insurance segment include, and the
         reinsurance segment exclude, $33.5 million relating to an
         intercompany stop loss arrangement. Consolidated results are not
         affected. The loss and loss expense ratio would have been 64.6% and
         75.1% and the underwriting results would have been a profit of
         $55.8 million and a loss of $125.0 million in the insurance and
         reinsurance segments, respectively, had this stop loss arrangement
         not been in place.
     5.  Economic operating income excludes net realized gains and losses on
         investments, net realized and unrealized gains and losses on
         derivatives, one-time charges, including realignment charges, net of
         tax, and amortization of intangible assets.


                                XL Capital Ltd
        SUPPLEMENTARY NON-LIFE PREMIUM INFORMATION BY LINE OF BUSINESS

                                (In thousands)
                                 (Unaudited)

                            FOR THE QUARTER ENDED
                              December 31, 2001


                             Gross Premiums    Net Premiums  Net Premiums
                                    Written         Written        Earned

    Casualty                       $544,902        $343,452      $339,975
    Property                        378,190         120,697       188,377
    Marine, energy, aviation
      and satellite                 111,878          68,588        74,595
    Lloyd's syndicates              211,796         187,758       176,606
    Other                           233,194         155,800       111,959
    Total                        $1,479,960        $876,295      $891,512

                            FOR THE QUARTER ENDED
                              December 31, 2000

                             Gross Premiums    Net Premiums  Net Premiums
                                    Written         Written        Earned

    Casualty                       $359,911        $209,571      $206,251
    Property                        128,487          72,317        86,221
    Marine, energy, aviation
      and satellite                  58,690          39,238        48,105
    Lloyd's syndicates               86,695          51,435        66,226
    Other                           143,201          91,569        90,618
    Total                          $776,984        $464,130      $497,421


                                XL Capital Ltd

        SUPPLEMENTARY NON-LIFE PREMIUM INFORMATION BY LINE OF BUSINESS

                                (In thousands)
                                 (Unaudited)

                              FOR THE YEAR ENDED
                              December 31, 2001

                             Gross Premiums    Net Premiums  Net Premiums
                                    Written         Written        Earned

    Casualty                     $1,699,460      $1,073,474    $1,017,565
    Property                      1,276,075         546,575       624,644
    Marine, energy, aviation
      and satellite                 510,291         310,197       287,387
    Lloyd's syndicates              693,016         537,614       481,307
    Other                           604,880         460,566       369,024
    Total                        $4,783,722      $2,928,426    $2,779,927

                              FOR THE YEAR ENDED
                              December 31, 2000

                             Gross Premiums    Net Premiums  Net Premiums
                                    Written         Written        Earned

    Casualty                     $1,127,551        $723,062      $749,105
    Property                        728,212         537,037       467,165
    Marine, energy, aviation
      and satellite                 365,850         230,356       212,273
    Lloyd's syndicates              486,640         311,814       357,824
    Other                           420,778         313,971       248,873
    Total                        $3,129,031      $2,116,240    $2,035,240

                                

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