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XL Capital Ltd Reports First Quarter 2003 Results



Net Income $239.9 million, or $1.74 per ordinary share
Net Operating Income $250.1 million, or $1.82 per ordinary share

HAMILTON, BERMUDA, April 28, 2003 -- XL Capital Ltd (“XL” or the “Company”) (NYSE: XL) today reported net income available to ordinary shareholders for the quarter ended March 31, 2003 of $239.9 million, or net income of $1.74 per ordinary share, compared with net income of $89.5 million, or a net income of $0.65 per ordinary share, in the first quarter of 2002. Net operating income for the first quarter of 2003 was $250.1 million, or $1.82 per ordinary share, compared with net operating income of $207.6 million, or $1.51 per ordinary share, for the quarter ended March 31, 2002 (see below for a reconciliation to net income).

Commenting on the first quarter 2003 results, Brian M. O’Hara, President and Chief Executive Officer of XL, stated: “We had a very strong first quarter with excellent underwriting results reflected in our combined ratio of 86.1% and net earned premium growth of 42% in our general insurance and reinsurance operations. Our net operating income return on ordinary shareholders’ equity exceeded 16% and book value per ordinary share increased to $46.09, a record level for XL.”

“Our general insurance and reinsurance businesses continue to see very strong pricing, most notably in casualty, professional lines and marine worldwide,” said Mr. O'Hara.

Mr. O’Hara further stated, “Despite our very robust underwriting results and strong cash flow during the quarter, the investment environment continues to be challenging with reinvestment rates at extremely low levels. This will continue to put pressure on industry results and underscores the need to maintain underwriting discipline in the market.”

The first quarter 2003 net operating results include a write down of the Company’s investment in Annuity and Life Re Holdings Ltd of $40.9 million.

Total assets as of March 31, 2003 were $37.5 billion compared with $35.6 billion as of December 31, 2002. Book value per ordinary share as at March 31, 2003 increased to $46.09 compared with $44.48 as at December 31, 2002.

Summary unaudited consolidated financial data for the quarters ended March 31, 2003 and 2002, respectively, are set forth below (in millions, except per share and share amounts):

                                       
           Three months ended
                March 31
              (Unaudited)

                                2003            2002

Gross premiums written        $ 3,147         $ 2,805
Net premiums written            2,489           2,159
Net premiums earned             1,552           1,065


Net income                    $ 250.0          $ 89.5
Preference dividend            (10.1)              --
Net income available
 to ordinary shareholders     $ 239.9          $ 89.5

Per ordinary share results:
Net income available
 to ordinary shareholders      $ 1.74           $0.65

Weighted average ordinary
  shares outstanding
 (in thousands):
Basic                         136,216          135,119
Diluted                       137,631          137,843

Gross premiums written for general operations in the first quarter of 2003 were $3.0 billion compared with $2.8 billion in the first quarter of 2002. Net premiums written increased to $2.4 billion from $2.1 billion and net earned premiums rose to $1.5 billion from $1.0 billion in the respective quarters of 2003 and 2002.

Gross premiums written for life operations in the first quarter of 2003 were $111.3 million compared with $38.5 million in the first quarter of 2002. Net premiums written for life operations in the first quarter of 2003 were $97.3 million compared with $37.0 million in the first quarter of 2002 and net earned premiums were $92.8 million in the first quarter of 2003 compared with $39.2 million in the first quarter of 2002.

Net investment income from general operations was $156.6 million in the first quarter of 2003, compared with $155.6 million in 2002's first quarter. Net investment income from life operations was $35.3 million in the first quarter of 2003 compared with $15.5 million for the quarter ended March 31, 2002.

The Company's equity in the net income of its investment affiliates for the first quarter of 2003 was $26.8 million versus $32.2 million in the first quarter of 2002. The Company's equity in net losses of its insurance and operating affiliates was $41.1 million in the first quarter of 2003 versus net income of $0.03 million in the first quarter of 2002.

The combined ratio for the Company's general insurance and reinsurance operations was 86.1% in the first quarter of 2003, versus 92.1% in the first quarter of 2002. The loss ratios were 60.9% and 63.2% in the quarters ended March 31, 2003 and 2002, with corresponding expense ratios of 25.2% and 28.9% for the same quarters, respectively.

A live on-line web cast of XL's call with analysts and investors to review the first quarter 2003 results will be held at 10:00 a.m. Eastern Time on April 29, 2003 at www.xlgroup.com. An unaudited financial information supplement relating to the Company's 2003 and 2002 quarterly and full year results is available on its website: 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.

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 sustainable as XL is currently projecting; (b) 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; (c) 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; (d) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; and (e) the other factors set forth in XL's most recent reports on Form 10-K and Form 10-Q as well as XL's other documents on file with the Securities and Exchange Commission. XL undertakes no obligation to update publicly 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 of U.S. dollars, except per 
                   share and share amounts)
                        (Unaudited)

                        Three Months Ended
                            March 31

                              2003          2002 (a)
Income Statement Data:

Revenues:
Gross premiums written -
 general and
 life operations           $3,147,139      $2,804,676
Net premiums written -
 general and
 life operations            2,489,084       2,158,853

Net premiums earned -
 general operations         1,458,860       1,025,522
Net premiums earned -
 life operations               92,771          39,193
Net investment income -
 general operations           156,581         155,609
Net investment income -
 life operations               35,323          15,518
Net realized losses
 on investments               (4,663)        (106,020)
Net realized and
 unrealized gains (losses)
 on derivative
 instruments                   14,493          (9,476)
Equity in net income of
 investment affiliates         26,798           32,185
Fee and other income           12,277            7,949
                             $1,792,440     $1,160,480

Expenses:
Net losses and loss
 expenses incurred -
 general operations          $885,254         $642,298
Claims and policy benefit
 reserves - life operations   119,558           47,763
Acquisition costs
 And operating expenses       430,831          330,877
Exchange gains                (2,702)           (8,364)
Interest expense               46,140           41,622
Amortization of intangible
 assets                           375              614
                           $1,479,456        $1,054,810

Income before minority interest,
 income tax expense and
 equity in net loss (income)
 of insurance and operating
 affiliates                  $312,984          $105,670

Minority interest               1,862             2,255
Income tax charge              20,030            13,954
Equity in net loss (income)
 of insurance and operating
 affiliates                    41,087              (32)

Net income                   $250,005            $89,493
Preference dividend          (10,148)                  -
Net income available to
 ordinary shareholders       $239,857            $89,493

Weighted average number of
 ordinary shares and
 ordinary share equivalents
 (in thousands) : Basic       136,216            135,119
                : Diluted     137,631            137,843

Per Share Data:
Net income available to
 ordinary shareholders
 (diluted)                     $ 1.74              $0.65

Note:

Certain reclassifications, which have no effect on net income, have been made to prior period results to conform to current presentation.


               XL Capital Ltd
         SUPPLEMENTAL FINANCIAL DATA
      (in millions of U.S. Dollars, except 
         per share and share amounts)
                (Unaudited)

The following is a reconciliation of the Company's net operating income to net income, for the three months ended March 31, 2003 and 2002:


                       Three months ended
                            March 31
                           (Unaudited)

                               2003              2002

Net income available to
  ordinary shareholders       $ 239.9           $ 89.5

Net realized losses on
 investments                      4.6            106.0
Net realized and unrealized
 (gains) losses
 on derivatives                (14.5)              9.5
Net gains on weather &
 energy risk management
 derivatives                     10.4              0.9
Tax effect on net realized
 losses on investments and
 realized and unrealized
(gains) losses on
 derivative instruments           9.7              1.7

Net operating income           $250.1           $207.6

Per ordinary share results:

Net income available to
 ordinary shareholders
 (diluted)                      $1.74            $0.65

Net operating income (diluted)  $1.82            $1.51

Weighted average ordinary
 shares outstanding
 (in millions):
Basic                           136.2            135.1
Diluted                         137.6            137.8

Net operating income is a non-GAAP measure. As calculated by the Company, net operating income is net income available to ordinary shareholders, excluding net realized gains and losses on investments and net realized and unrealized gains and losses on all derivatives (except for gains and losses on weather and energy risk management derivatives). These items are excluded because they are not considered by management to be relevant indicators of the performance of or trends in XL's core business operations, but rather of the investment and credit markets in general. Management believes that the presentation of net operating income provides useful information regarding XL's results of operations because it follows industry practice, is followed closely by securities analysts and rating agencies, and enables investors and securities analysts to make performance comparisons with XL's peers in the insurance industry. This measure may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on net operating income as a non-GAAP measure in assessing XL's overall financial performance.

                                 
                   XL Capital Ltd
           SUMMARY CONSOLIDATED FINANCIAL DATA
          (In thousands of U.S. dollars, except 
              per share and share amounts)
                    (Unaudited)

                     As at March 31,   As at December 31,
                          2003               2002

Balance Sheet Data:

Total investments 
 available for sale       $17,207,273      $16,059,733

Net payable for
 investments purchased      1,668,469        1,546,276

Cash and cash equivalents   3,152,328        3,557,815

Investments in affiliates   1,729,593        1,750,005

Intangible assets           1,652,998        1,653,700

Total assets               37,461,625       35,647,369

Unpaid losses and loss
 expenses                  13,496,875       13,202,736

Deposit liabilities and
 future policy benefit
 reserves                   4,980,912        4,889,996

Notes payable and debt      1,884,158        1,877,957

Total shareholders'
 equity                     6,812,245        6,569,589


Total ordinary
 shareholders' equity (1)   6,294,745        6,052,089

Ordinary shares
 outstanding              136,560,490      136,063,184

Book value per
 ordinary share                $46.09           $44.48

Note:
(1) Excluding preference share capital of $517,500.

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